Rising home values and interest rates
have more homeowners turning to home equity products to meet their personal funding needs.
Earlier this year, borrowers' attraction to home equity products was hurt by the confusion over whether tax reform totally or partially removed the interest deductibility, said Mike Kinane, the senior vice president of consumer lending at TD Bank.
With the IRS clarifying
what is deductible, TD Bank is "bullish on home equity. There was a little bit of a hit in the first half of this year, the second half of this year is going to get back to normal and then smooth sailing in 2019 and beyond," Kinane said.
Consumers still need funds to do things like renovate or repair their homes as well as for purposes like financing a child's college education "and home equity is typically one of the best options for consumers to do that," said Kinane.
Because it is secured by property, taking out a home equity loan or line of credit is cheaper than using a credit card or other unsecured forms of borrowing.
"Responsible home equity borrowing can be a valuable source of funds for life events," Tendayi Kapfidze, LendingTree's chief housing economist, said in a press release. "It's important to note that this new wave of home equity lending is far different from the equity extraction that occurred prior to the financial crisis, and lending standards are much more stringent today. Most home equity borrowers today have far higher credit scores and borrow less of the accumulated appreciation in their home."
Meanwhile, "lenders are much more responsible in their underwriting of home equity then they were precrisis. Lenders are more careful on second position liens," Kinane said. "And consumers that are getting this product are much more careful about how they're using this product and much smarter than they were precrisis when it truly was using your home as a piggybank."
Here's a look at the seven most popular uses for tapping into home equity, ranked by the primary reason consumers gave while searching LendingTree for loan products in 2018.